What is 'Capital Employed'
Capital employed, also known as funds employed, is the total amount of capital used for the acquisition of profits. It is the value of all the assets employed in a business and can be calculated by adding fixed assets to working capital or subtracting current liabilities from total assets. By employing capital, you make an investment.
BREAKING DOWN 'Capital Employed'
Capital employed is a frequently used term but is very difficult to define because there are so many contexts in which it can be used. All definitions generally refer to the investment required for a business to function. It refers to the value of assets used in the operation of a business. Put simply, it is a measure of the value of assets minus current liabilities. Both of these measures can be found on the balance sheet. A current liability is the portion of debt that must be paid back within one year. In this way, capital employed is a more accurate estimate of total assets. Like return on assets, investors use return on capital employed to get an approximation for what their return might be in the future.
Capital Employed
Capital employed is primarily used by analysts to determine the return on capital employed. Return on capital employed (ROCE) is thought of as a profitability ratio. It compares net operating profit to capital employed and tells investors how much each dollar of earnings is generated with each dollar of capital employed. Some analysts prefer return on capital employed over return on equity and return on assets since it takes longterm financing into consideration, and is a better gauge for the performance or profitability of the company over a longer period of time. A higher return on capital employed suggests a more efficient company, at least in terms of capital employment. A higher number may also be indicative of a company with a lot of cash on hand since cash is included in total assets. As a result, high levels of cash can sometimes skew this metric.
ROCE Calculation Example
Return on capital employed is calculated by dividing net operating profit, or earnings before interest and taxes, by employed capital. Another way to calculate it is by dividing earnings before interest and taxes by the difference between total assets and current liabilities.
As an example, if a company makes $10,000 in operating profit, has $100,000 in assets and $25,000 in current liabilities, the return on capital employed is $10,000 divided by $75,000, or 13%. A return on capital employed of 13% means that for every dollar invested in capital employed, the company made 13 cents of profits. By contrast, if the company made $50,000 in operating profit, the calculation is $50,000 divided by $75,000, or 60%, which is much better. In the latter example, the company is making five times more money per dollar of capital employed.

Return on Average Capital Employed ...
A financial ratio that shows profitability compared to investments ... 
Working Capital
Working capital is a measure of both a company's efficiency and ... 
Return On Assets Managed  ROAM
A measure of profits shown as a percentage of the capital that ... 
Return On Capital Gains
The return that one gets from an increase in the value of a capital ... 
Return On Invested Capital  ROIC
A calculation used to assess a company's efficiency at allocating ... 
Special Employer
An employer who receives an employee on loan from another business, ...

Investing
Key Financial Ratios to Analyze Investment Banks
Find out which financial ratios are most useful when analyzing an investment bank, and why tracking capital efficiency is especially important. 
Investing
Calculating Return on Net Assets
Return on net assets measures a company’s financial performance. 
ETFs & Mutual Funds
Profitability Indicator Ratios: Return On Capital Employed
By Richard Loth (Contact  Biography)The return on capital employed (ROCE) ratio, expressed as a percentage, complements the return on equity (ROE) ratio by adding a company's debt liabilities, ... 
Investing
Calculating Days Working Capital
A company’s days working capital ratio shows how many days it takes to convert working capital into revenue. 
Markets
Explaining Working Capital Turnover
Working capital turnover is a ratio that helps show how efficiently a company is generating revenue per dollar of cash available to spend on operations. 
Investing
Explaining Cost Of Capital
Cost of capital is the cost of funds used to finance a business. 
Investing
The 4 R's Of Investing In Retail
In retail, successfully managing return on investment (ROI) and other financial indicators is the key to a healthy business. 
Investing
Understanding Capital Investment
Capital investment is a term that describes a company’s expenditures for longterm assets used in the operation of its business. 
Retirement
Employers: Don't Forget IRS Form 941
Your obligations as an employer include various employment taxes. Use this form to report them. 
Managing Wealth
Understanding the Capital Gains Tax
A capital gains tax is imposed on the profits realized when an investor or corporation sells an asset for a higher price than its purchase price.

How can I calculate capital employed from a company's balance sheet?
Discover how to define and then use a simple method to measure a company's capital employed by looking only at its balance ... Read Answer >> 
As an investor in stock, how should I evaluate a company's capital employed?
Learn how to define, calculate and evaluate a company's capital employed. See how to use return on capital employed to compare ... Read Answer >> 
How is working capital different from fixed capital?
Understand the differences between working capital and fixed capital, including definitions and examples of how businesses ... Read Answer >> 
What is the difference between capital investment decision and current asset decision?
Learn how capital investment decisions are longterm funding decisions, while current asset decisions are shortterm funding ... Read Answer >> 
What can working capital be used for?
Find out what working capital is used for, including how to calculate this financial metric by subtracting current liabilities ... Read Answer >> 
Can working capital be negative?
Learn under what circumstances negative working capital can arise and what it means when working capital stays negative for ... Read Answer >>